Homeowners capitalize on falling mortgage rates
Mortgage lock volumes saw a slight uptick as more homeowners refinancing their home loans took advantage of lower rates.
Mortgage lock volume rose 3.33% month over month, largely driven by a significant boost in refinance activity, according to Mortgage Capital Trading’s (MCT) latest report. Total mortgage volume remained stable but low compared to the booming years of 2020 and 2021.
A recent quarter-point drop in both conventional 30-year and government-backed 30-year mortgage rates sparked a 103.19% rise in refinance applications from the previous month.
This sharp increase in refinances has helped offset otherwise stagnant production levels, with the overall year-over-year mortgage volume up by 21%. Much of this growth has been attributed to refinances as homeowners with higher interest rates locked in lower monthly payments.
“Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments,” said Joel Kan, deputy chief economist at the Mortgage Bankers Association (MBA). “Similar to purchase activity, refinance activity has picked up across the various loan types.”
Kan also noted that the refinance share of mortgage applications averaged nearly 46% in August, marking the highest monthly average since March 2022.
Meanwhile, purchase applications also showed some momentum, rising 3% from the previous week. Overall, mortgage loan application volume grew by 1.6% on a seasonally adjusted basis and 0.2% on an unadjusted basis.
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Industry experts point to potential rate cuts by the Federal Reserve as a driving force behind the recent activity. Lenders appear to be pricing in these anticipated reductions, and market volatility may follow depending on the Fed’s decision.
“We could see additional short-term market volatility as the Fed considers a 25 or 50 basis point rate cut,” Andrew Rhodes, senior director and head of trading at MCT, said in the report. “Friday’s nonfarm payroll report will provide further clarity on that decision.”
Holden Lewis, home and mortgage expert at NerdWallet, also commented on the current rate environment.
“Mortgage rates held fairly steady this week, as the market awaits the Federal Reserve’s monetary policy meeting that occurs week after next. The Fed is expected to cut short-term rates, and mortgage rates already have dropped in anticipation of that,” Lewis said. “That means mortgage rates will remain relatively unchanged until the Fed meeting.”
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